The Airline Loyalty Edition

On status, strategy, and miles

Colin here. Pre-COVID, airline status was a bragging right of a certain tier of the traveling public. Road warriors would rack up the miles, and in turn, unlock gamified levels of status. From the entry-level American Airlines Gold, all the way to Lufthansa’s rarified Hon Circle, these schemes are built and refined by airlines to create stickiness and addiction. The benefits unlock little things that make the traveling experience more pleasant: early boarding, access to international lounges, preferred seats, and the ability to actually get through to someone on the phone. Look around at any airport boarding line, and you’re sure to spot the various status tags dangling from someone’s Tumi bag. The signaling is implicit: I’m important enough that my company spends the money to fly me all around! 

But, post-COVID, a lot of business travel is in limbo. Now that we’ve proven a lot of things can be done on Zoom, there are existential questions for the future of business travel at the front of the plane, along with the corresponding “carrots” of enticing people to be loyal to an airline to receive their ego-boosting status and corresponding riches. 

Sure, business travel will continue in certain circumstances: face time with teams, strategic planning sessions, and perhaps most vividly, to close an important sale in person over a splashy dinner. Year over year, the status programs for US airlines got harder and hard to reach. In addition to flying miles, you also have to jump through revenue hoops and other types of gates. For example, a Delta Diamond Medallion member needs to fly 125,000 miles with their airline, but also spend $15k. This was obviously a way for the airline to reward higher spending premium tickets. 

Why is this interesting? 

If a large amount of this business travel is curtailed, what will become of loyalty programs and the status of old? One prediction I have is this might be a forcing factor for people to step off the yearly treadmill of keeping up with the standards. People might retain a loyalty association that they port their credit card points over to, but another possibility is that more people will just end up buying the right product for their specific travel needs? I’ve recently spoken to a few folks who have told me that with their travel cut down to ten or twenty percent, they’re simply opting to buy business class tickets for the few flights they take and not worry about where their status will land in 2022. 

This theory actually works out for more of the luxury travel segment: if you’re buying business class tickets, you’re already getting a lot of the bells and whistles that airlines give to high-status customers. So, if those benefits are off the table, a lot of customers might just pick the best flight, for the best routing, for the best product they can get for the price. The idea of a large exodus from the shackles of existing frequent fliers into free agent status could be a cool thing. More people could experience more products and be able to shop by price and experience, rather than blind and outdated loyalty. (CJN

Chart of the day: 

The price of used vehicles via The Economist (CJN)

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Thanks for reading,

Noah (NRB) & Colin (CJN)

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